I've taken a particular viewpoint of how to see this whole solar thing as an investment. When I got ready to retire, I had a PERS pension. I had the option to buy up to 5 years worth of work years for $135,000 and it would pay me $880 a month for the rest of my and my wife's lives w/ a 5% max COLA.
This solar project can be viewed the same way. Interestingly enough, an installed system can be had for 1/10 the cost of the 5 year buy in on my PERS pension; $13,500. For $13,500, I would be getting $110 worth of electricity in at today's market price. I would continue to get that same quantity of electricity no matter what the inflation is, not capped at 5% like my PERS buy-in.

Looks to me that the solar project would be a decent investment. I'd have to get 8.6% a year, for 25 years in order to get the same return solar is giving me with that PERS account buy-in. The PERS pays only a bit over 7%.

Does that make sense? That's my perspective at least. I think of it as buying an annuity.

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I wonder if it might make sense to build your system to something well below 95% of your present usage.

Absolutely!

For the most bang-for-the-buck, building a system that keeps your utility company usage into tier one is a great way to approach this.

With the micro inverter option, adding more panels to your system later is easy as pluging in after mounting the racks to the roof, so it's not rocket science to figure out or replace undersized inverters.

Most systems replace around 50% to 70% of the homeowners use.

Quote:

Originally Posted by samclem

California proclivities and demographics, it might be a safe bet to assume there will continue to be a lower rate for the first few hundred kwh while the "fat cats" pay higher rates.

The utilities were sued in court over this practice and lost. Since utilities are monopolies, and customer/rate payers can't shop around for electricity, AND that electricity is deemed a 'critical infrastructure resource', the courts ruled in favor of the plaintiffs and told the utilities that they can not charge more than their costs just because a customer uses more power than another. (profit margin regulated) They MUST demonstrate that the upper power use requires a higher cost source of generation. The days of offsetting a low, under funded tier at the expense of higher tiers are pretty much done. I'm sure the ledgers can be shown that the lower cost generation covers the lower tiers and that only the more expensive generation sources are needed to supplement them, but with a court ruling, I imagine the California PUC will be auditing those books pretty close.

Remember; in California, and to a lesser extent, the rest of the nation, is to try and reduce energy use of any sort. Whether it's by guilting people into thinking they are the cause for global warming, weather changes, species extinction, or what ever means, their goal is to control the use of this 'critical resource'. That is the nature of government. In the US society, that is held in check with it's constitution, but even that is subject to revisionist history rewrite and interpretation. (I better shut up or I'll get my post edited.... Ha!)

The point you and I make is that there is political issues at hand. Like any investment, we are standing in the sidelines, taking bets on an outcome that is sure to be rigged but unable to decipher how it's done. So we play the odds and percentages.

As a side note;
Most if not everyone on this forum thinks of themselves as independent. Financially at least. We can own shares of a utility as an investment and we own a small part of that business. This is just a means of cutting out the middleman, by becoming more active in the game.
It doesn't have to be a large investment, in fact, as samclem points out, there are deminishing returns due to the tiered rate structure. At some point though, the investment in owning your own generation is going to be seen as a fairly stable, long term investment that pays from the onset and recaptures the capital in 7 or 8 years. A lot of business plans are not near that level of profitability.

Does that make sense? That's my perspective at least. I think of it as buying an annuity.

I think cutting expenses in general is a great idea, especially recurring expenses and I'm all for self sufficient living. My only suggestion would be have you maxed out your potentially lower cost / higher pay back conservation options first - like LED bulbs, insulation, sealing door and windows, getting rid of a second fridge, going around with a Kill a Watt?

I have a book on solar projects not involving solar panels, like we are looking at possibly heating our house with an attached green house.

__________________Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)

I think cutting expenses in general is a great idea, especially recurring expenses and I'm all for self sufficient living. My only suggestion would be have you maxed out your potentially lower cost / higher pay back conservation options first - like LED bulbs, insulation, sealing door and windows, getting rid of a second fridge, going around with a Kill a Watt?

I have a book on solar projects not involving solar panels, like we are looking at possibly heating our house with an attached green house.

Right, another good reason to start with a smaller system (offsetting the higher tier only). We hear that prices on systems will continue to go down, so waiting isn't so bad. Start smaller, get better payback from the high tier, and get a better handle on the realities while you try out conservation measures. Apply the initial savings to the added panels when they make sense.

Related to all this, I read an article recently that pointed out that if we are going to subsidize solar, it should be based on an estimate of the system's annual production, rather than the system's cost. After all, that's the point right - more clean kWh? It would reward installations that produce more power (sunny areas, no shade, good orientation), and tend to create more motivation to lower prices (the price delta would go 100% to the solar buyer, rather than the percentage not subsidized). Maybe could adjust that based on a factor for how dirty the daytime grid is in an area.

Looks to me that the solar project would be a decent investment. I'd have to get 8.6% a year, for 25 years in order to get the same return solar is giving me with that PERS account buy-in. The PERS pays only a bit over 7%.

Does that make sense? That's my perspective at least. I think of it as buying an annuity.

Doesn't that assume that you have no maintenance expenses, and that the panels maintain the same level of efficiency over that 25 years? Is that likely? Most of the electronics I purchased 15 years ago have already been retired, and those don't sit out in the elements 24/7.

__________________
I can't complain, but sometimes I still do.
- Joe Walsh

Remember, net metering means the power company buys back what you don't use. I'm in California with PG&E. If I go to Time-Of-Use, the rates are 5 cents per kWh off peak and 35 cents per kWh peak. If my meter runs backwards during the peak, they pay me 35 cents per kWh. That could add up and might be worth it. Getting PG&E to pay the invoice might be another matter though...

But I agree; it doesn't make sense in your situation. This would have to be a hobby or you are interested in the whole CO2 pollution/carbon footprint renewable resource thing as something you feel morally or ethically compelled to do. Many people in California with solar get it just for that reason.

If you want to reduce your carbon footprint then just buy renewable energy.... I am buying it now, but not that I feel guilty.... it is just cheaper with their teaser rate....

We hear that prices on systems will continue to go down, so waiting isn't so bad.

Waiting is bad for three reasons;
1. The 30% federal tax credit expires on Dec. 31st 2016
2. The net metering capacity will fill out sooner than that in many markets.
3. State and utility company rebates will expire or run out of funds sooner rather than later.

These are incentives for getting solar rolling. Once the costs for panels and ancillary equipment drop in cost, so will the incentives.

Quote:

if we are going to subsidize solar, it should be based on an estimate of the system's annual production, rather than the system's cost.

It is, indirectly. A 5kWh sized solar generation on a home is going to produce a certain amount of electricity. If it doesn't, the recovery of the buyer's capital is going to fail to meet it's goals. Solar companies are entering into contracts with buyers that the system they design and sell will produce a set volume of power. This is required by law in California. Every contractor selling solar systems are required to use this calculator when sizing a system so that the customers know they are not being over sold on a system. I've got to say, it's pretty well regulated that you know what you are buying when you contract for a solar installation.

In my project, the calculator takes into account my latitude, 38 degrees, the azimuth, 160 degrees (20 degrees East of South) and a tilt of 22 degrees. A perfect set up at my latitude, is 180 degrees and a tilt of 26 degrees. My less than perfect mounting accounts for about a 3% loss of efficiency. The calculator says that a 5kWh sized solar plant will generate 3650kWh of electricity in one year. If it doesn't, within reason, then something is broken.

A savvy customer is going to work out the math for themselves and not take a salesman's word for it. I've worked with a few outfits, one place even has solar plants set up with on-line monitoring so you can view their production as well as past performance. Systems I've checked into all offer wifi connectivity to measure solar performance down to the individual panels. Historical data is archived and several solar product producers will host your data on their website for scientific data gathering purposes.

Doesn't that assume that you have no maintenance expenses, and that the panels maintain the same level of efficiency over that 25 years? Is that likely? Most of the electronics I purchased 15 years ago have already been retired, and those don't sit out in the elements 24/7.

My northern California rooftop system is now 9 years old and my savings have offset my subsidized cost (this last year). I purchased the system with the expectation that the quoted efficiency and maintenance numbers were exaggerated. Well, so far the system has only required cleaning with a mop every six months (no additional maintenance) and there has been no measurable decline in output. I was initially shocked that the system put out what the brochures said it would, and I am still surprised that it continues to perform as it initially did.

My initial calculations were that the ultimate ROI would be about the same as the rate at which power prices escalate...not so far from what the OP posted. I ended up installing enough kW to offset about 75% of kWh usage, and that has translated to offsetting 100% of the power bill due to the difference between on-peak and off-peak generation and usage.

We have a ground mounted 32 panel, micro-inverter system that was installed about 18 months ago. No storage or battery system and was sized to cover about 50% of our electrical usage. With 3% annual energy increase costs, we figured it would pay off in about 8-9 years- a long time but we plan to be here.

Panels and inverters are warranted for 25 years and we expect to lose about %1 per year or so of efficiency but liked the idea of going at least partially solar so admit there was some emotion in the decision. We've also been selling about 10 SREC (Solar Recovery Energy Credit) per year through a broker at an average of about $37 per month after costs- we didn't know about this when we installed our system so this is a nice bonus. The system so far is producing a bit more energy than predicted- we were told that most of the data that is available to use for planning was usually a bit understated- for us, this has turned out to be the case.

We found a local installer that was easy to work with and did a portion of the install ourselves, the micro-inverters are pretty much plug and play with one AC connection to the existing service panel through a breaker. If I was doing a ground mount system again, I'd do the whole thing myself. We have a whole house generator if needed so didn't want to deal with a battery backup system.

Net is, we're very happy with the decision to install but know it wasn't based on a purely financial basis, few things are I've found, lol. Good luck with your decision.

re-sale is our problem. We put ours in a few years ago before we thought we would be retiring/downsizing. Now we will never get our ROI but hope that it adds some resale value as the buyers will be able to offset much of their electric costs. We were close to 90% offset until we both got elec vehicles and tenants in our extra space above garage so consumption has gone up the last year.

Has anyone had to replace their roof after installation of a solar system? If so, did this add cost to the roofing job and is this included in people's economics for solar?

In Texas, our typical asphalt shingle roofs take a lot of heat and do end up needing replacement in ~ 15 yrs or so. Normally one can do the first reroof by laying over a new set of shingles over the old one saving quite a bit of demolition cost. The second reroof normally requires all the shingles to be removed....adding cost. I was watching a "This Old House" episode where solar panels were put on top of the shingles and really wondered about the impact on roofing costs on solar economics over time. The show did not mention this.

Doesn't that assume that you have no maintenance expenses, and that the panels maintain the same level of efficiency over that 25 years? Is that likely? Most of the electronics I purchased 15 years ago have already been retired, and those don't sit out in the elements 24/7.

Solar panels do remarkably well for electronics subject to the temps that panels get (or anything on a roof for that matter). They do reduce output as they age. Most manufacturers guarantee that output will be at least 80% of spec after 25 years.

This group is very good to catch that most calculations for "payback" don't calculate relative to a safe investment alternative. One thing to be very careful of is the rosy predictions of power output. Much of the country does not really have that many clear days--some south western states excluded.

One thing to be very careful of is the rosy predictions of power output. Much of the country does not really have that many clear days--some south western states excluded.

Actually, there's a very useful tool for predicting solar power production for a given US location at PVWatts website. You have to know some basics about your proposed system but the calculator takes into account typical climatic conditions based on historical data.

So far our projections have been very accurate despite living in vermont with many cloudy days. What was a surprise was last Feb where snow cover and cold weather meant we only had a couple days where we generated ANYTHING. Normally the snow falls off but the combination of heavy snow with persistent cold weather didn't allow it to slide off even in sunny weather.

Has anyone had to replace their roof after installation of a solar system? If so, did this add cost to the roofing job and is this included in people's economics for solar?

This is one reason that the roof of a dwelling is not an optimum place for a solar array. I'd feel better about putting a solar array up there if I had a metal roof (50+year life). Another option is an outbuilding/shed that can be put where there is the least shade/best angles for catching the sun, and can have a metal roof.
I like that our house and lot has mature trees and plenty of shade, but it does limit where I could put PV panels.

Just a reminder that the utility bill savings you get with solar are equivalent to tax-free income from other investments.

I agree, and I think cutting expenses like energy bills tends to be underrated topics here compared to topics like stocks. I can't control stock market returns but we've cut our energy bill by around $2,400 a year so far. Over a potential 40 years that is $2,400 X 40 = $96K in after tax money.

Personally, I'd rather be home sitting on the patio reading energy conservation books from the library and trying out thermal cooker recipes than commuting and working in an office 7 am - 7 pm or longer to earn the equivalent of that kind of savings in after tax money.

Our roof isn't the best location for solar and we have lots of trees, and at current prices panels just aren't cost effective for us. Our current electric bill is only around $600 a year. But I do have some books on interesting solar projects that do not involve panels.

__________________Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)

I agree, and I think cutting expenses like energy bills tends to be underrated topics here compared to topics like stocks.

There are many websites out there for those who want to dive deeply into the 'how to strain glass from a broken jar of peanut butter' school of frugal living. There are even more websites devoted exclusively each of the many flavors of market investing. I find both to be a bit extreme and lacking in diversity.

My opinion is this board has a nice balance of LBYM and investment discussions which has been a key to its success.

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